Standard & Poor's said it has revised its credit assessment of the company that would result from the merger of Olivetti SpA and Telecom Italia SpA. The rating agency raised its preliminary credit estimate for the combined entity to A-minus this week, from a March estimate of BBB-plus.

S&P based its earlier estimate on the assumption that Olivetti would need to assume about $40 billion of debt to buy Telecom Italia. But Olivetti will probably need to issue only about $28 billion of debt to finance the acquisition, now that it has obtained a majority of ordinary shares.

Yet the debt that Olivetti plans to issue through Tecnost-a shell company that it created to issue fixed-rate notes to finance the deal-would continue to be one notch lower than the debt issued by Olivetti and Telecom Italia directly.

That is because the debt issued by Tecnost would be subordinated to the debt issued by Olivetti and Telecom Italia, according to the rating agency. But Olivetti executives may roll Tecnost into the new company in three to five years. In that case, S&P said, Tecnost would receive the same rating as the combined company.

Though the amount of bonds necessary to finance Olivetti's takeover of Telecom Italia will probably be less than most market observers expected, the bond issue would still dwarf any other issued in euros.

The roughly $8 billion in fixed-rate notes that Tecnost is expected to issue would be more than double the size of a bond issued by Germany's Mannesmann last week, which is the largest euro-denominated bond to date.

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